IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-30985
CERTAIN UNDERWRITERS AT LLOYD’S, Etc.; ET AL.,
Plaintiffs,
CERTAIN UNDERWRITERS AT LLOYD’S, LONDON, subscribing to
Renewal Certificate No. VV111280Q,
Plaintiff - Appellant-Cross-Appellee,
versus
MICHAEL T. GRAY; ERIC V. GRAY,
Defendants - Appellees-Cross-Appellants.
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Appeal from the United States District Court
for the Eastern District of Louisiana
97-CV-1290-E
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March 26, 2001
Before, KING, Chief Judge, ALDISERT* and BENAVIDES, Circuit
Judges.
PER CURIAM:**
Certain Underwriters at Lloyd’s of London (the Underwriters)
appeal from a district court’s conclusion that the Inchmaree
Clause of a marine hull insurance policy issued by the
Underwriters to Michael and Eric Gray (the Grays) covered a loss
*
Circuit Judge of the Third Circuit, sitting by
designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
sustained due to a defect in the hull of the PEREGRINE, a yacht
jointly owned by the Grays. At issue is not the existence of a
hull defect, but (1) whether the defect was “latent,” and (2)
whether the loss should have been attributed to the Grays’
failure to detect the defect through reasonable due diligence.
In a cross-appeal, the Grays argue that the district court
improperly granted summary judgment on their claim for attorney’s
fees. See LA. REV. STAT. ANN., §§ 22:658, 22:1220.
Having reviewed the briefs, record, and arguments on appeal,
we reject the Underwriters’ arguments that the district court
erred in resolving the coverage issues presented in this case.
The district court defined a latent defect as a condition which
“could not have been discovered by someone of competent skill
using ordinary means.” Contrary to the Underwriters’ contention,
this definition does not depart from the objective standard
traditionally used by this Circuit to describe latent defects.
See Tropical Marine Products, Inc. v. Birmingham Fire Insurance
Co., 247 F.2d 116, 121 n.11 (5th Cir. 1957). At any rate, the
district court explained that it would reach the same result
“under any reasonable definition of ‘latent defect’ used by
various courts.” Gray v. Certain Underwriters at Lloyd's London,
NO. CIV. A. 97-1130, CIV. A. 97-1290, 1999 WL 22844, *6 n.10
(E.D.La., Jan 15, 1999)(emphasis in original).
We also reject the Underwriters’ argument that the district
court misapplied the latency standard to the facts of this case.
The district court found insufficient basis in the record to
conclude that the Grays should have discovered the defect in the
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hull of the PEREGRINE. Specifically, the court rejected the
Underwriters’ attempt to link what expert independent contractors
perhaps could have discovered about the PEREGRINE’s hull, and
what the Grays reasonably should have discovered or investigated
as “Sunday skippers.” Additionally, the court found that
reasonable owners would not have conducted additional diligence
work on the hull of the PEREGRINE that would have detected the
defect prior to January 1997 when the PEREGRINE capsized. The
record clearly supports the district court’s findings.
Accordingly, we affirm the district court’s conclusion that the
hull defect within the PEREGRINE was latent and covered by the
Inchmaree Clause of the marine hull policy.
Finally, we find no error in the district court’s denial of
the Grays’ claim for attorneys’ fees. On the unique and unusual
circumstances of this case, the district court did not err in
concluding that the Underwriters’ decision to deny coverage both
on the P&I and hull policies, although ultimately flawed, was not
taken in bad faith. The court’s specific findings adequately
support this determination.
For these reasons, we AFFIRM the judgment of the district
court in all respects.
AFFIRMED
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